What can we learn from the 2008 financial crisis for global power decarbonization after COVID-19?

Abstract

Since the outbreak of the COVID-19 pandemic, power generation and the associated CO<inf>2</inf> emissions in major countries have experienced a decline and rebound. Knowledge on how an economic crisis affects the emission dynamics of the power sector would help alleviate the emission rebound in the post-COVID-19 era. In this study, we investigate the mechanism by which the 2008 global financial crisis sways the dynamics of power decarbonization. The method couples the logarithmic mean Divisia index (LMDI) and environmentally extended input-output analysis. Results show that, from 2009 to 2011, global power generation increased rapidly at a rate higher than that of GDP, and the related CO<inf>2</inf> emissions and the emission intensity of global electricity supply also rebounded; the rapid economic growth in fossil power-dominated countries (e.g., China, the United States, and India) was the main reason for the growth of electricity related CO<inf>2</inf> emissions; and the fixed capital formation was identified as the major driver of the rebound in global electricity consumption. Lessons from the 2008 financial crisis can provide insights for achieving a low-carbon recovery after the COVID-19 crisis, and specific measures have been proposed, for example, setting electricity consumption standards for infrastructure construction projects to reduce electricity consumption induced by the fixed capital formation, and attaching energy efficiency labels and carbon footprint labels to metal products (e.g., iron and steel, aluminum, and fabricated metal products), large quantities of which are used for fixed capital formation.